Public-private partnership law a boon for big investments – experts

A new law passed by the Lower Chamber of Parliament last week to govern public-private partnerships will be an important boost for investors in major projects in the country, especially those from overseas, experts have said. Under the proposed PPP law, a “Public-Private Partnership” or “PPP” is defined as a “contractual arrangement between a contracting authority ( of the government) and a private partner which involves the sharing of risks for a significant period of time in terms of functions related to financing, design, construction, rehabilitation, operation and/or maintenance or management of an infrastructure facility, other asset, or a public service based on pre-defined output specification on behalf of the Contracting Authority”. The private partner receives financial remuneration for provision of assets or services either by way of government contributions, charges or user fees, or a combination of such contributions, and such charges or user fees. The draft law stipulates that the application of PPPs must be closely aligned to government’s development goals and strategies, with contractors opting to apply for the management of government contracts or investing in infrastructure projects on the basis of lease-operate-develop (LOD), build-operate-transfer (BOT), build-operate-own, as well as any other PPP arrangement that may be prescribed by guidelines or policies supplementing the law on PPPs. Patrick Yoon, the chief executive officer of Olleh Rwanda Networks (ORN), a company that provides 4th Generation Long-Term Evolution internet (4GLTE) in Rwanda, says he was very sceptical when he was asked by his boss at Korea Telecom (KT) to come to Rwanda and head their company’s investment. Given the small size of the country, with a population of about 11 million, and given that Rwanda is landlocked, Yoon wondered if their company would not make more money investing in a larger country in Africa. But his boss told him that Rwanda was the place where KT had chosen to invest given the government’s commitment to support the business by getting shares in it and mobilising citizens to be part of it. ORN was formed as a joint venture between the Government of Rwanda and KT, South Korea’s largest telecommunications provider, with the aim of covering more than 90 per cent of the country with 4GLTE fast internet by 2017 and exporting the internet to neighbouring countries. Under their terms of agreement, KT brought in expertise and invested $140 million (Rwf98 billion) in the project, while the government laid a 3,000km-national fibre optic cable to facilitate fast internet. While KT would have invested in another country in Africa other than Rwanda, Yoon says the support of the Rwandan government and its partnership in the project informed their choice. “It is natural to go where you will get support. Based on government support, there is high potential for business success,” he said. Yoon is one of many business experts who believe that the Rwandan government is making a bold move by enacting a law to govern public-private partnerships (PPP). “It is a natural and clear message that the government is inviting overseas investors by guaranteeing them its support. My understanding is that more investors will come to Rwanda thanks to this law,” he said. According to the Rwanda Development Board (RDB) chief executive, Francis Gatare, Rwanda needs a special law to regulate PPPs because the ordinary law on public procurement is not enough to attract investors. “The Rwandan public procurement law does not cater for the complexity of procuring PPP projects through long-term contractual arrangements. The PPP law resolves this issue by setting out clear and detailed procurement processes for PPP projects in different sectors of our country’s economy,” he said. The law will govern different sectors, including transport, as well as various forms of energy and municipal infrastructure projects such as the provision of water, waste management and industrial parks. Other sectors that the law will govern include social infrastructure such as those related to education, culture, health, tourism, sports and leisure, as well as infrastructure related to prisons, forestry, public housing and land, oil and gas pipelines, mining, telecommunication, and information communication technology (ICT). Gatare said the Government aims at using PPP procurement to accelerate the delivery of public infrastructure and services by tapping into the private sector’s financial resources, as well as benefitting from its skills in designing, building, and operating infrastructure “on a whole life-cycle cost reduction basis”. “Regional projects such as the regional railways project and other Northern Corridor projects will be procured by using the PPP model. At the country level, infrastructure projects such as power generation projects, among others, will also be procured by using the PPP Law once it has been promulgated,” he said. Once the PPP law is in place, the Government hopes to better attract investors because it will be clear in the law what they can expect before committing themselves to long-term ventures. “Notwithstanding the numerous infrastructure investment needs and opportunities, the private sector is very selective in its partnerships and investment decisions and looks at legal frameworks such as the PPP Law to provide guidance on what to expect during the long-term relationship with the public sector. Because Rwanda has already provided a conducive business environment to investors, once the PPP bill is enacted into law, we expect that investments from the private sector, especially in PPP projects, will increase and, as such, speed up the delivery of public infrastructure and services,” Gatare said. Teddy Kaberuka, an economic analyst based in Kigali, concurs that having a specific law on PPPs will attract investors to Rwanda. He said the law is “very important” for the country’s economy since “giant investments are risky and need public support in order to run because they are complex in nature and require to be backed up by comprehensive and conducive policy”. “In a growing economy like Rwanda, the PPP law will attract more foreign direct investment for big development projects such as in the energy sector, infrastructure development, and tourism. It will also create job opportunities while boosting the economy in general,” he said. An official at Rwanda’s Private Sector Federation in charge of private-public-dialogue, Edmund Tumwine, described the PPP law as a boon for big investments in the country. He said the law will protect investors when it comes to their engagements with the government in joint business projects. “The law shows how the private sector can engage the government on making joint investments. Prior to this law, it was not hard to make joint investments but there was no legal instrument backing up the partnership. A PPP law is a boost for investments because it is one of the things that investors consider while trying to make decisions,” Tumwine said. The draft law awaits the President’s assent before its publication in the official gazette. editorial@newtimes.co.rw

News

Public-private partnership law a boon for big investments – experts